Crude Oil Forecast: WTI, Brent Battle Strong USD Ahead of OPEC+

Crude Oil Key Points

• The supply outlook for WTI and Brent crude oil is a more potent driver of price action in the current environment than the US dollar.
• OPEC+ may opt to maintain its current supply cuts in its meeting this weekend.
• The near-term technical outlook for both WTI and Brent is neutral as traders await a clear breakout from sideways price ranges.

As many readers already know, commodities are priced in US dollars on the global market. Therefore, a rising US dollar – which we’re seeing this week – means it takes fewer greenbacks to buy a given amount of a commodity such as a barrel of oil, and the US dollar price of that commodity falls – something we’re definitely NOT seeing this week when it comes to oil prices.

Why Are Crude Oil Prices Rallying Despite the Strong Dollar?

Put simply, the supply outlook for WTI and Brent crude oil is a more potent driver of price action in the current environment.

According to a report from Reuters, rising global oil inventories due to weak fuel demand may prompt OPEC+ to maintain supply cuts at their June 2 meeting. The OPEC+ group, which includes OPEC and allies like Russia, are set to discuss extending voluntary output reductions this weekend.

Despite previous production cuts, OECD oil stocks increased by 20 million barrels in March to 2.79 billion barrels. The International Energy Agency (IEA) reported a global stock rise of 34.6 million barrels in March, with tankers avoiding the Red Sea due to Yemeni conflicts. April saw continued inventory growth as crude was offloaded from tankers, with one delegate noting that rising inventories were “a concern” for the group. While non-OECD stocks rose, OPEC’s data indicates potential large inventory drawdowns later in the year as the US reaches peak gasoline demand during its summer driving season.

In addition to this weekend’s key decision by OPEC+, crude oil traders should also monitor Friday’s US Core PCE report as a potential driver for the US dollar.

Crude Oil Technical Analysis – WTI Daily Chart

Source: TradingView, StoneX

Turning our attention to the chart, WTI crude oil peaked above the $80 level for the first time this month overnight before pulling back in today’s US session. For now, the commodity remains in its 4-week range between $77 and $80, leaving a neutral near-term technical bias. While short-term traders may look for scalping opportunities within the range, medium- and longer-term traders will prefer to wait for a confirmed breakout, with a bullish breakthrough opening the door for a move back toward the late April highs near $84 and a bearish breakdown targeting the 61.8% Fibonacci retracement near $75 initially.

Crude Oil Technical Analysis – Brent Daily Chart

Source: TradingView, StoneX

Flipping the chartbook to Brent, we see a very similar picture. The global crude oil benchmark probed a 4-week high yesterday but is pulling back into its recent range today, keeping Brent’s short-term technical outlook in neutral territory for now. Looking ahead, traders will be watching for a break of the $81.50-$84.50 range to signal the next tradable leg for Brent.

-- Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX